Davos: Persuading big business to act on climate change

There was good news and bad news from Davos this year. Dire warnings were issued about the dangers of climate change, but a new report argued that big businesses can limit the temperature rise – if only governments can unleash their potential.

Movers and shakers from business and government gathered in Davos, Switzerland, last week for the annual World Economic Forum (WEF). They discussed global risks like financial instability, rising food prices and climate change.

"We just don't have that much public money," says Dominic Waughray, a senior director of the WEF in Geneva, Switzerland, and one of the authors of the report. The 2008 financial crisis has slashed public funds, he says.

However, Waughray says governments can encourage the private sector to step up. Currently, the world's governments spend $96 billion a year tackling climate change. The WEF report estimates that if they increase that to $130 billion, governments could unleash $570 billion a year of private capital.

To do this, the public money must be used to encourage private investment in green technologies. Rather than funding projects like wind farms outright, Waughray wants the money used to reduce the risk for private investors.

Major infrastructure projects often receive this sort of support. If a company wants to build a power plant in a developing country, but is worried that the country could become unstable, it can buy a form of insurance from the World Bank's Multilateral Investment Guarantee Agency. If the host country becomes unstable and stops buying power from the plant, MIGA covers the lost income.

"The public money is the buffer so the private company feels comfortable with the project," says Waughray.

Stepping up

One such fund was launched in Davos. The International Finance Corporation, part of the World Bank, has started a Catalyst Fund to help companies that are tackling climate change by, for instance, building renewable power plants or boosting energy efficiency. It has already raised $280 million.

Their major concern is extreme weather events, which can disrupt supply chains. Nearly 700 of the companies were already investing in emissions cuts, and 63 per cent of those companies said they were doing so because climate change was a physical risk to their business.

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